SBA Loan Requirements: Do You Qualify?

The Quick Answer

SBA loans have the best rates and longest terms in business lending. But they're also the hardest to qualify for. Not everyone can get one - and that's by design.

Here's the short version: you need a 640+ credit score (690+ preferred), at least 2 years in business, enough revenue to cover your payments, and a 10% down payment. You also can't have an unresolved default on a government-backed loan.

If that sounds like you, keep reading - we'll break down every requirement so you know exactly where you stand. If some of those numbers don't match, don't close this page yet. We'll cover your options at the end.

Credit Score Requirements

Your credit score is the first thing lenders look at. It's not the only thing - but if it's too low, nothing else matters.

Personal Credit Score

The SBA itself doesn't set a hard minimum. But the lenders who actually fund the loans do. Here's what we see across 100+ lender relationships:

• 640: The floor. A few lenders will work with this, but your options are limited and rates will be higher.
• 680: The sweet spot where most SBA lenders start getting comfortable. You'll have more options.
• 690+: The best rates, the most lender choices, and the smoothest approval process.
• Below 640: SBA is probably not the right product for you right now. But there are other options (more on that below). See our full credit score guide for business loans to find what you qualify for at any score level.

Business Credit Score (SBSS)

Most people don't know this one exists. The FICO Small Business Scoring Service (SBSS) combines your personal credit, business credit, and financial data into one score from 0 to 300.

Since April 2025, the SBA has required a minimum SBSS score of 165 for loans processed through their automated system. However, effective March 1, 2026, the SBSS score is being discontinued for 7(a) Small Loans. Lenders will shift to "generally accepted commercial credit analysis" instead. SBA Express loans are unaffected by this change.

Time in Business & Revenue

How Long You've Been in Business

The SBA doesn't publish a strict time-in-business requirement. But the reality on the ground is clear: most lenders want at least 2 years of operating history.

Under 2 years? You're not automatically out, but it's harder. You'll need to show:

• Strong personal credit (690+)
• Relevant industry experience
• A solid business plan with realistic projections
• Revenue that's already trending in the right direction

Startups under 1 year are the toughest SBA candidates. Programs like SBA Express and SBA Microloans are more startup-friendly, but the amounts are smaller and the requirements are still real.

Revenue Requirements

There's no magic revenue number. Instead, lenders use a debt service coverage ratio (DSCR). In plain English: can your business afford the loan payments?

Most lenders want a DSCR of 1.25 or higher. That means for every $1 in loan payments, your business earns at least $1.25 in available cash flow.

Here's what that looks like in real numbers:

Based on 10-year SBA 7(a) term at approximately 10.5% (Prime + 3.0%, the cap for loans over $350K). Actual payments vary by loan size, term length, and lender.

Financial Documentation

This is where deals die. Not because the business doesn't qualify - but because the owner can't produce the paperwork. You'll need:

• 3 years of business tax returns (2 years minimum)
• 3 years of personal tax returns for all owners with 20%+ stake
• Year-to-date profit & loss statement
• Balance sheet
• Business bank statements (3-6 months)
• Business debt schedule (list of existing loans and payments)

Down Payment & Collateral

Down Payment (Equity Injection)

Most SBA loans require you to put 10% down. The SBA calls this an "equity injection." It's your skin in the game - proof you're investing in your own business, not just borrowing someone else's money.

The June 2025 SOP changes standardized the 10% requirement for most 7(a) loans. Before that, some lenders were more flexible. Now, the rules are clearer but stricter.

For SBA 504 loans (real estate and equipment), the down payment depends on your situation:

• 10%: Established businesses (2+ years) buying standard property
• 15%: New businesses (under 2 years) or special-purpose properties
• 20%: New businesses buying special-purpose property

Collateral

Here's the good news: you won't be denied an SBA loan just because you don't have collateral. Cash flow is the primary consideration.

Here's the reality: lenders are required to take available collateral. That means:

• Under $50,000: Collateral usually not required
• $50,000-$350,000: Lenders take a lien on available business assets
• Over $350,000: Lenders take business assets and may require personal assets (like your home) if business collateral falls short

The June 2025 changes also tightened collateral documentation requirements. Lenders now need to formally document any collateral shortfall, even on smaller loans. This doesn't change who qualifies - it changes how much paperwork is involved.

What Will Get You Denied

This is the part most articles skip. But it's the part that matters most - because knowing what disqualifies you saves you months of wasted time.

Automatic Disqualifiers

• Government loan default: If you've ever defaulted on a government-backed loan (previous SBA loan, federal student loan, etc.) and haven't resolved it, you're automatically disqualified. This is the biggest one.
• Excluded industries: Cannabis (still federally illegal), gambling, lending/investment firms, non-profit businesses, speculative real estate, life insurance companies, and others (21 categories total).
• Active legal issues: Pending criminal charges, active lawsuits related to the business, or current bankruptcy proceedings.
• Not a US-based business: The business must operate in the United States (or a US territory) and be organized under US law.

Likely Disqualifiers

• Credit score below 640: Technically possible at some lenders, but practically very difficult.
• No tax returns filed: If your taxes aren't up to date, no lender will touch the file. Past extension deadline without filing? Fix that first.
• Negative cash flow: If your business is losing money, SBA lenders won't finance more debt. They need to see the ability to repay.
• Unreported income or messy books: If your financials don't add up - bank deposits don't match tax returns, expenses aren't documented - the deal falls apart in underwriting.
• Recent bankruptcy: Most lenders want at least 3 years since bankruptcy discharge, though some will consider 2 years with a strong recovery story.

June 2025 Rule Changes

The SBA updated its Standard Operating Procedures on June 1, 2025. If you're researching SBA requirements, make sure your information is current. Here are the changes that affect qualification:

• Down payment standardized at 10%: Less flexibility for lenders to waive or reduce the equity injection requirement.
• SBSS minimum raised to 165: Up from 155. However, the SBSS score is being discontinued entirely for 7(a) Small Loans effective March 1, 2026. Lenders will use standard commercial credit analysis instead.
• Collateral documentation expanded: Lenders must now document collateral positions more formally, even on smaller loans. More paperwork, same qualification criteria.
• Citizenship and residency rules tightened: Through February 28, 2026, lawful permanent residents (LPRs) can still qualify. Effective March 1, 2026, only U.S. citizens are eligible to own any percentage of an SBA borrower. This is a major change affecting all 7(a) and 504 programs.

For the full breakdown, read our complete guide to the June 2025 SBA rule changes.

Qualification Checklist

Here's a simple scorecard. Check each item honestly. The more you check, the stronger your SBA application will be.

Don't Qualify? Here's What to Do

If the checklist above didn't go your way, you're not out of options. You're just not an SBA candidate right now. Here's the game plan:

If Your Credit Score Is Too Low

A business term loan or business line of credit may work with a 600+ score. Use it, pay on time, build your credit. In 6-12 months, come back for SBA with a stronger profile.

If You're Too New

Credit stacking works for startups with good personal credit (700+). It doesn't require business revenue or time in business. Build your track record, then graduate to SBA when you're ready.

If You Need Money Fast

SBA loans take 30-120 days. If you need capital in a week, a merchant cash advance or term loan gets you funded faster. The rates are higher, but speed has value. Many business owners use alternative financing now and refinance into SBA later for better long-term rates.

Frequently Asked Questions